JAMES STOKES, AS ATTORNEY-IN-FACT OF DANIEL STEPHEN ADOLFSON AND DANIEL STEPHEN ADOLFSON, PLAINTIFFS-APPELLEES, VS. MALAYAN INSURANCE CO., INC., DEFENDANT-APPELLANT.

This is an appeal by Malayan Insurance Company, Inc. (MALAYAN) from a
decision of Court of First Instance of Manila ordering it to pay the
insured under a car insurance policy issued by MALAYAN to Daniel Stephen
Adolfson against own damage as well as third party liability.

The facts are not in dispute. Adolfson had a subsisting MALAYAN car
insurance policy with the above coverage on November 23, 1969 when his
car collided with a car owned by Cesar Poblete, resulting in damage to
both vehicles. At the time of the accident, Adolfson’s car was being
driven by James Stokes, who was authorized to do so by Adolfson.
Stokes, an Irish citizen who had been in the Philippines as a tourist
for more than ninety days, had a valid and subsisting Irish driver’s
License but without a Philippine driver’s license.

After the collision, Adolfson filed a claim with MALAYAN but the latter
refused to pay, contending that Stokes was not an authorized driver
under the “Authorized Driver” clause of the insurance policy in relation
to Section 21 of the Land Transportation and Traffic Code.

Under the insurance policy, “authorized driver” refers to –

“(a) The insured

“(b) Any person driving on the insured’s order or with his permission.

“PROVIDED that the person driving is permitted in accordance with
the licensing or other laws or regulations to drive the motor vehicle
and is not disqualified from driving such motor vehicle by order of a
court of law or by reason of any enactment or regulation in that
behalf.”

The cited Section 21 of the Land Transportation and Traffic Code provides:

“Operation of motor vehicles by tourists. – Bona fide
tourists and similar transients who are duly licensed to operate motor
vehicles in their respective countries may be allowed to operate motor
vehicles during but not after ninety days of then sojourn in the Philippines.

x x x x

“After ninety days, any tourist or transient desiring to operate
motor vehicles shall pay fees and obtain and carry a license as
hereinafter pro­vided.” (Italics supplied.)

Unable to convince MALAYAN to pay, Stokes and Adolfson brought suit
before the Court of First Instance of Manila and succeeded in getting a
favorable judgment, although Stokes had ceased to be authorized to drive
a motor vehicle in the Philippines at the time of the accident, he
having stayed therein as a tourist for over 90 days without having
obtained a Philippine driver’s license. The Court held that Stokes’
lack of a Philippine driver’s license was not fatal to the enforcement
of the insurance policy; and that MALAYAN was estopped from denying
liability under the insurance policy because it accepted premium payment
made by the insured one day after the accident. It said:

“Defendant cannot evade liability under the policy by virtue of
the above provision of the Land Transportation and Traffic Code. This
is an insurance case. The basis of insurance contracts is good faith
and trust between the insurer and the insured. The matter of the
failure on the part of Stokes to have a Philippine driver’s license is
not such a defect that can be considered as fatal to the contract of
insurance, because the fact is that Stokes still had a valid and
unexpired Irish license. As a matter of fact, the traffic officer who
investigated the incident gave Stokes a traffic violation receipt and
not a ticket for driving without license.

“Then the Court believes that defendant is in estoppel in this
case because it allowed the plaintiff to pay the insurance premium even
after the accident occurred. Admitting for the sake of argument that
there was a violation of the terms of the policy before the incident,
the admission or acceptance by the insurance company of the premium
should be considered as a waiver on its part to contest the claim of the
plaintiffs.”

In this appeal, the two issues resolved by the court a quo are raised anew. We find the appeal meritorious.

1. A contract of insurance is a contract of indemnity upon the
terms and conditions specified therein. When the insurer is called upon
to pay in case of loss or damage, he has the right to insist upon
compliance with the terms of the contract. If the insured cannot bring
himself within the terms and conditions of the contract, he is not
entitled as a rule to recover for the loss or damage suffered. For the
terms of the contract constitute the measure of the insurer’s liability,
and compliance therewith is a condition precedent to the right of
recovery. (Young vs. Midland Textile Insurance Co., 30 Phil. 617.)

Under the “authorized driver” clause, an authorized driver must not only be permitted to
drive by the insured. It is also essential that he is permitted under
the law and regulations to drive the motor vehicle and is not disqualified from so doing under any enactment or regulation.

At the time of the accident, Stokes had been in the Philippines for more
than 90 days. Hence, under the law, he could not drive a motor vehicle
without a Philippine driver’s license. He was therefore not an
“authorized driver” under the terms of the insurance policy in question,
and MALAYAN was right in denying the claim of the insured.

2. Acceptance of premium within the stipulated period for payment
thereof, including the agreed period of grace, merely assures continued
effectivity of the insurance policy in accordance with its terms. Such
acceptance does not estop the insurer from interposing any valid defense
under the terms of the insurance policy.

The principle of estoppel is an equitable principle rooted upon natural
justice which prevents a person from going back on his own acts and
representations to the prejudice of another whom he has led to rely upon
them. The principle does not apply to the instant case. In accepting
the premium payment of the insured, MALAYAN was not guilty of any
inequitable act or representation. There is nothing inconsistent
between acceptance of premium due under an insurance policy and the
enforcement of its terms.

WHEREFORE, the appealed judgment is reversed. The complaint is dismissed. Costs against the appellees.

SO ORDERED.

Teehankee, (Chairman), Melencio-Herrera, Relova, and Gutierrez, Jr., JJ., concur.